Monro 3Q: New stores behind record sales
Monro Muffler Brake Inc. reported net income of $16.0 million on net sales of $236.6 million for its third quarter ended Dec. 27, 2014. That compares to income of $15.3 million on sales of $216.7 million for the same period last year. The company set a net sales record for the third quarter.
With the 4.3% increase in net income and 9% increase in sales, the company’s income-to-sales ratio was 6.7%. Operating income for the third quarter was up 3.8% to $28.0 million from $26.9 million in the third quarter of fiscal 2014.
The sales increase for the third quarter was due to an increase in sales from new stores, partially offset by a decrease in comparable store sales of 1.8%. The company added 21 and closed seven locations during the third quarter, ending the quarter with 1,017 stores.
In October 2014, Monro completed the previously announced acquisition of nine stores in Atlanta, Georgia. In December 2014, the company completed the acquisition of nine stores in the Fort Lauderdale and Palm Beach region of Florida. Monro says the two acquisitions add approximately $19 million in annualized sales.
On a combined basis, the company’s acquisitions completed year-to-date add 72 locations and three new states, with total annualized sales of $84 million, representing approximately 10% annualized sales growth.
The decrease in comparable store sales of 1.8% breaks down as follows:
* alignments up 10%;
* brakes up 2%;
* tires and maintenance services down 3%;
*exhaust down 1%; and
* front end/shocks down 2%.
The company anticipates fiscal 2015 comparable store sales to range from flat to a decrease of .5%. Monro anticipates total sales for fiscal 2015 to be in the range of $900 million to $905 million. For the fourth quarter of fiscal 2015, the company anticipates comparable store sales to be in the range of flat to an increase of 2%.
CEO and President John Van Heel says Monro was able to deliver sales and EPS results in line with its expectations for the quarter due to the continued outperformance of our recent acquisitions and its ability to drive lower costs by leveraging its increasing scale.
“While cold weather and snow drove positive comparable store sales through November, particularly in tires, this was more than offset by lower sales in December amidst warmer weather and the holiday shopping season.
“For the year, we are encouraged by the momentum we've experienced in our service business as consumers continue to turn to Monro for needed repairs and maintenance. This is demonstrated by positive comparable sales, year-to-date, in key service categories, including oil changes, brakes, front end/shocks and alignments. While we are disappointed these trends have been offset by deflationary pressure and continued customer deferrals in the tire category, we are encouraged by our competitive position.
“Despite the ongoing choppiness in the consumer spending environment, our strong business model and disciplined acquisition strategy has allowed us to deliver record profits and 100 basis points of operating margin expansion year-to-date. We remain confident in our ability to continue to increase our market share and deliver strong sales and earnings growth, in both strong and weak environments."
Although “choppy” trends are expected in the near term, Van Heel says Monro’s long-term outlook for the industry and company remains positive.
“We are well positioned to manage our business in this environment, demonstrated by the ongoing strength of our service categories, outperformance of our recent acquisitions and our ability to drive increased profitability in our tire offering, while providing value to our consumers.
"As always, we remain focused on driving top-line growth, while controlling costs and achieving even greater economies of scale through acquisitions. In the first nine months of this fiscal year, we have completed acquisitions that expanded our geographic footprint to three new, contiguous states and are expected to add 10% annualized sales growth.
"Importantly, we continue to see attractive acquisition opportunities in the marketplace created by the challenging operating environment, which we will pursue in a disciplined manner. Looking forward, we will continue to leverage our strong business model and we are confident that our long-term strategic plan will enable us to expand our market share and deliver shareholder value."
For details on Monro’s second-quarter results, see “Monro has record results; enters Georgia market.” To see the perspective of Monro’s Executive Chairman Robert Gross, see “Gross says Monro could triple in size.”